Rightways

Tuesday, October 22, 2013

No asset bubble, said Malaysian Central Bank governor

Malaysia has addressed many issues, risks

Zeti:‘There is confidence in the financialsystem.’- EPA

KUALA LUMPUR: There is no reason to believe that Malaysia has seen
the formation of an asset bubble that is about to burst, as the country
has addressed many of the issues and risks related to it, says Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.

She said three series of macro prudential measures had been introduced
this year to avoid the very risk of the formation of such a bubble
asset.

She was responding to a question on whether Malaysia was
experiencing an asset bubble that would burst if China’s economy tumbled
and as global interest rates rose, as reported recently by the foreign
media.

“Conditions between now and in 1997/1998 are different. We
are now on a growth path,” she told a press conference in conjunction
with the South East Asian Central Banks (Seacen) 30th Anniversary
Conference on Greater Financial Integration and Financial Stability and
launch of the Seacen Financial Stability Journal.

Zeti said domestic demand was driving Malaysia’s economic growth and
the country was not at the epicentre of the recent global financial
crisis.

“Our financial intermediaries remain resilient and the supply of credit was never disrupted,” she added.

She said financial intermediation was continuing and financial markets continued to function.

“There is confidence in the financial system. This is the result of the
focus over the last decade on financial reforms that have strengthened
the foundation of our financial system.

“We believe that credit
growth has moderated to a sustainable pace that supports the growth of
the economy. In this regard, we continue to monitor conditions,” Zeti
added.

Meanwhile, in her opening address at the conference, Zeti
said the modernisation of the Asian financial system had been
accompanied by a significant strengthening of the regulatory and
supervisory frameworks.

She said it had also been accompanied by
improved financial safety nets, a more effective surveillance of
financial stability risks and stronger legal underpinnings.

“These reforms supported the transition towards more market-oriented
financial systems that are anchored in stronger institutions, risk
management capacity and governance,” she added.

“Significant strides also continue to be made in strengthening consumer
protection frameworks, promoting financial inclusion, and enhancing
market discipline,” she said.

She also said these developments
continued to support the region through the recent episodes of
turbulence in the global financial markets.

“The region has also
made important strides in enhancing monetary and financial cooperation
arrangements to address regional financial stability issues and global
policy spillovers.

“Much has been accomplished in the areas of
surveillance arrangements, financial safety nets and crisis prevention,
management and resolution,” she added.

On the Asian financial
integration model for the ten Asean economies, Zeti said it was focused
on strengthening pre-conditions through collective capacity building to
promote more open market access.

“It also focuses on
progressively reducing barriers to facilitate cross-border trade,
developing the market infrastructure and an enabling environment to
promote the efficient and effective intermediation of cross-border
financial flows.

“It also focuses on establishing appropriate safeguards for the stability of the financial system,” she added.

Meanwhile, Bank Negara and the Bank of Korea
jointly announced the establishment of a bilateral local currency swap
arrangement. It is designed to promote the use of local currencies for
bilateral trade and strengthen financial cooperation between Malaysia
and South Korea, Bank Negara said in a statement.

This arrangement allows for the exchange of local currencies between
the two central banks of up to five trillion Korean won or RM15bil.

The effective period of the arrangement is three years, and could be
extended by mutual agreement between the central banks. - Bernama